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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has placed a cap on the peso to control soaring price increases and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise for significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in countries run by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people have already paid a heavy price.